Chapter- 3

VOLKSWAGEN INDIA : CASE STUDY

“INNOVATIVE CAMPAIGN INSPIRES 2,700 CAR RECOMMENDATIONS IN 4 WEEKS”

INTRODUCTION : Volkswagen was originally founded in 1937 by the Nazi trade union, the German Labour Front (Deutsche Arbeitsfront). In the early 1930s German auto industry was still largely composed of luxury models, and the average German rarely could afford anything more than a motorcycle. Seeking a potential new market, some car makers began independent "peoples' car" projects – Mercedes' 170H, Adler's AutoBahn, Steyr 55, Hanomag 1,3L, among others.

In 1933, with many of the above projects still in development or early stages of production, Adolf Hitler declared his intentions for a state-sponsored "Volkswagen" program. Hitler required a basic vehicle capable of transporting two adults and three children at 100 km/h (62 mph). The "People's Car" would be available to citizens of the Third Reich through a savings scheme at 990 Reichsmark, about the price of a small motorcycle (an average income being around 32RM a week).

Industry Automotive: Founded 28 May 1937

Founder(s): Ferdinand Porsche

Headquarters: Wolfsburg, Germany

Area served: Worldwide

Volkswagen is the original and biggest-selling marque of the Volkswagen Group, which now also owns the Audi, Bentley, Bugatti, Lamborghini, SEAT, and Škoda marques and the truck manufacturer Scania.

Volkswagen means "people's car" in German, Its current tagline or slogan is Das Auto (in English The Car).

Operations

Volkswagen has become a large international corporation from where it started and expanded to different worldwide markets and countries. The world headquarters of Volkswagen are located in its home country in Wolfsburg, Germany. Volkswagen AG, owned by the Volkswagen Group, is situated with other car manufacturers including Audi, SEAT, Lamborghini, Bentley, Bugatti, Scania, and Skoda.

Volkswagen is currently Europe's largest automaker. For a long time, Volkswagen has had a market share over 20 percent.Worldwide, Volkswagen officially ranks as the 3rd largest manufacturer behind Toyota and GM as measured by OICA in 2009.

In 2010, Volkswagen posted record sales of 6.29 million vehicles, with its global market share at 11.4%. Volkswagens core markets include Germany and China. After overtaking Ford in 2008, Volkswagen became the third largest automaker in the world. Volkswagen has aimed to double its US market share from 2% to 4% for the year 2014, and is aiming to become, sustainably, the world's largest car maker by 2018.

Ownership

Volkswagen is a publicly traded company, which issued ordinary shares and preferred shares. The ownership structure is complex. The following table shows the current shareholder structure. Note that neither the Porsche Automobile Holding nor the Porsche GmbH are identical with the Dr. Ing. h.c. F. Porsche AG, which is responsible for the production of Porsche sports cars. The Porsche Automobile Holding is owned by the Porsche family, the Emirate of Qatar, 49.9% are owned by the Volkswagen AG. The Porsche GmbH was sold to the Volkswagen AG.

Worldwide presence

Volkswagen has factories in many parts of the world, manufacturing or assembling vehicles for local markets. Volkswagen has manufacturing or assembly plants in Germany, Slovakia, China, India, Indonesia, Russia, Brazil, Argentina, Portugal, Spain, Poland, Mexico, Bosnia and Herzegovina, and South Africa. Volkswagen also has a new plant in the United States. In 2011, it was named in the top 25 largest companies in the world by the Forbes Global 2000.

Cars

Volkswagen sells a number of cars under its namesake brand, including sedans, MPVs, trucks, SUVs, and coupes. Their product range extends from the supermini Polo, to compact Golf, to mid-size Jetta and Passat, and full-size Phaeton. SUVs include the Tiguan and Touareg.

Volkswagens current model range:

Fox Polo Golf

Golf Plus

Beetle Passat

Passat CC

Scirocco Tiguan

Eos Jetta Touran

Sharan Touareg Phaeton

Volkswagen India: Volkswagen India Private Limited is a subsidiary of Volkswagen Group Sales India Private Limited that assembles, manufactures and distributes Volkswagen vehicles in India. It was established in 2007.

Manufacturing Facilities

Volkswagen India Private Limited operates a manufacturing plant in Chakan, Maharashtra which is capable of producing 110,000 vehicles per annum. The plant is also shared by Škoda Auto India Private Limited for assembling the Škoda Fabia.

Sales Performance

In the year 2010, VIPL recorded sales of 32,627 vehicles against 3,039 vehicles sold during the year 2009 and registered a sales growth of over 1,000%.

Sales and Service Network

Volkswagen India Private Limited currently has more than 70 dealerships in 56 cities across 18 states and 2 union territories of India.

IN INDIA

Volkswagen (VW) is one of the world’s leading automobile manufacturers and the largest carmaker in Europe. As Volkswagen pursues its goal of becoming the number one automaker in the world by 2018, India has become a key component of its strategy. India is currently the world’s second fastest growing car market, with shipments expected to more than double by 2018.

With its headquarters in Pune, Maharashtra (India), the Volkswagen Group is represented by three brands in India: Volkswagen, Audi and Skoda. The Volkswagen Group is completing 10 years of its India journey which began with the entry of the Skoda brand in 2001, Audi brand and Volkswagen brand in 2007. Each brand has its own character and operates as an independent entity in the market.

As a relatively recent entry into the Indian automotive market, VW needed to raise brand awareness. To address this challenge, Volkswagen’s marketing team focused one of its key brand pillars, innovation, to make a strong impact throughout the roll-out in India. Innovation was showcased not only in Volkswagen’s product introductions, but also in its communications and advertising.

Chapter- 4

Corporate Strategy

Global challenges such as climate change and scarce resources demand sustainable solutions.

Volkswagen Group has been employing various methods to envisage the future and thereby enhance its competitive position.

Volkswagen Group has charted a clear course with our “18plus” strategy.

Mach 18Plus Strategy

Focus lies on becoming an economic and environmental leader in the global automotive industry.

Strive for success in terms of profitability, customer satisfaction and quality, accessing new markets and increasing production output, and attractiveness as an employer.

The “plus” element stands for more entrepreneurial thinking, more synergies and more ecology.

Volkswagen will harness the strengths of the Group and its nine brands with an environmentally-oriented model range .

Volkswagen has set its sights on new environmental benchmarks.

The company has earmarked annual expenditure for development and investments in new models and technologies in excess of €8 billion over the next few years.

Boost the sales volume from present 6.5 million to more than 10 million cars.

The incremental volume aimed for will more or less come from Brazil, Russia, China and India.

India’s Contribution in 18plus Strategy

Indian car market is the 10th largest car market with annual sales of around 1.4 million cars.

The market size is expected to increase to 4 million cars by 2015.

Volkswagen aims to increase its market share from a meager 1% presently to 10 % in next 5 years.

VW picked up 19.9 per cent stake in the Suzuki Motor Corp (SMC) for USD 2.5 billion last year.

Maruti Suzuki India is the crown jewel of the Japanese car maker.

Volkswagen is open to jointly developing products with Maruti Suzuki India, as part of its efforts to achieve synergy with Suzuki Motor Corp at the global level.

Business Strategy

Skoda Auto India

• Launched its first product, the OCTAVIA, in India in 2001.• It Was the only possible step to enter India.• Skoda adopted a Focus Strategy approach relying on

differentiation as a luxury car maker.

It now plans to come up with a new Fabia which will be more competitively priced and another small car priced between 3-5 lacs(by 2012).

Audi India

• Audi is one of the world’s leading premium brands.• Basis of its success comprises pioneering concepts in the

domains of advanced technology and design.• Audi has been selling its products in Indian market since

2004.• For this Audi AG has earmarked investments of up to €30

million (Rs174 crore) by 2015 in its local operations.• Also Audi India plans to come up with a car in corporate

entry level i.e.Toyota Camry following the lead of BMW.

Chapter- 4.i

Growth Strategy Matrix

Functional Strategy

Marketing Strategy of VW India

• China is the 2nd largest market for VW Group after Europe.• Volkswagen plans to use its learning in China in India.• Aggressive price tags and high-decibel advertisements.• Volkswagen’s strength lies in the mass market. Its name,

after all, means people’s car in German. 

PRODUCTSCurrent New

MAR

KET

SCu

rren

t

New

Market Penetratio

n

Product Developm

ent

Market Developm

ent

Diversification

Brand Positioning

When VW started out in 2007, low brand awareness was one of the key concerns.

Thus Volkswagen came out with 13 advertisements in a leading English newspaper.

 It told readers all they ever wanted to know about Volkswagen — how the name came about, its product line and so on.

By the time the campaign ended, Volkswagen had used 18,000 television spots, 144 insertions in broadsheet dailies, 50 insertions in magazines, 280 out-of-home sites and 23 digital portals.

To improve brand recall, the next campaign showed all Volkswagen cars: The Beetle, Passat, Jetta and Touareg.

Value Prestige

Ratio

nal

Em

otion

al

Swot Analysis of Volkswagan

Strengths :

VW has boosted quality more than any other carmaker in the past five years, cutting defects by 60% ·

The new Beetle has injected buzz into the brand, luring buyers into dealerships where they're also snapping up Passats, Jettas, and Audis ·

VW's share price climbed 36% last year, nearly double the pace of the overall German market ·

In the US, where VW ADRs trade over the counter, VW outperformed GM ·

Piëch has a "name", and had acquire a lot of experience running Audi ·

VW managers attend test drives, and therefore know exactly their different products

Their "family culture", no leading brand · A non-stop requirement for the new projects · Cost-control with the purchasing list · Own seven different car brands, offering two broad

categories, one for the traditional driver and one for the performance-minded driver. ·

Hide financial results through German accounting principles

Weaknesses ·

VW still trails Toyota, Mercedes, Nissan, and Honda in overall quality ·

VW is suffering from a bad image of its management department even though they have done an incredible work; Piëch has no relational skills, especially with the press

They have the same problem inside the company, due to the fact that Piëch has put his own team in place when he arrived, firing all potential enemies ·

Piëch blurs the line between his family interests and those of VW ·

Bad publicity due to the sue from GM · VW's cost of capital is relatively higher than Daimler's · VW bungled its communications with investors

Opportunities

Take advantage of the attractiveness of the new Beetle to get customers into point of sales

Growth potential in the American market, last year American sales rose to their highest level in 17 years, with a 59% increase for VW and a 39% increase for Audi

Due to its very good results on the stock exchange, VW may expect to attract numerous new investors

Potential cost decrease with their production strategy - five platforms only

Threats

A softening in auto sales in Europe and South America in projected for 1999

Risk of self-cannibalization between VW's brands, like top of the line VW's models and bottom of the line Audi's

Risk of brand dilution, confusion between the VW Passat and the Audi A4

Customer based brand equity

The Volkswagen customer based brand equity is equally strong on the left and right hand sides.

It is also strong from bottom to top, enjoying the highest brand awareness of a carmaker as well as high repeat purchase rates and customer loyalty.

To a certain extent Volkswagen has successfully focused on both the superior product attributes and the imagery associated with owning and driving a Volkswagen.

SUPPLY AND DISTRIBUTION

Volkswagen India Private Limited currently has more than 70 dealerships in 56 cities across 18 states and 2 union territories of India.

There are company specified retailers and distributors through out the world who are in constant touch with the parent and comply implicitly.

Dealers also have round the clock servicing and repair.

Volkswagen also has a used car portal where one can choose and buy his/her appropriate model.

Communication @ VW

Most of the Volkswagen communication takes place through print media in magazines and newspapers.

This is supported by communication through TV advertisements and point of sales promotion.

Now a days a good company has a state of the art web portal, Volkswagen websites are highly informative, interactive and a pleasure to watch.

One can get any amount of detailed information regarding the prices, features, retailers, and support services etc.

Chapter-4.ii

VOLKSWAGEN: “Think BLUE”

BlueMotion is a trade name for certain car models from the Volkswagen Group with an emphasis on higher fuel efficiency.

Volkswagen introduced the name in 2006 on the Mk4 Polo BlueMotion, and in 2007 a version based on the current Passat was released. More recently, the technology has been used in SEAT's models like the SEAT Ibiza or the SEAT León under the name 'EcoMotive, and in the Škoda Fabia and Superb, where the technology is called "GreenLine". BlueMotion versions of the Golf Mk5 andTouran were released in 2008. The name refers to Volkswagen Group's corporate colour, blue, with the word 'motion' added to denote mobility, and echoes DaimlerChrysler's BlueTec.

The BlueMotion Polo (based on the Mk4 Polo) and Ibiza Ecomotive used a special 1.4 L three cylinder Turbocharged Direct Injection (TDI)diesel engine which develops 59 kW (80 PS; 79 bhp) achieves 3.9 L/100 km (72 mpg-imp; 60 mpg-US) while producing just 102 grams of CO2 per kilometer. Both figures are lower than the outgoing hybrid Toyota Prius'. The Ibiza has now moved on to use the new 1.2 L TDI engine.

The BlueMotion Golf Mk6 uses a new 1.6 L TDI engine, and Polo Mk5 uses a new 1.2 L TDI engine.

BlueMotion strategy

BlueMotion Volkswagens use existing technology to improve on the standard engine/vehicle.

Currently BlueMotion strategies focus on three areas of improvement:

EngineRevised engine mapping, diesel particulate filters and oxidising catalytic converters help the fuel consumption and lower NOx levels. In the more modern incarnations there's also a start-stop system that halts and restarts the motor at brief stops.

TransmissionThe last two gear ratios are longer than on standard TDI engine gearboxes.

Reduced rolling resistanceLow-resistance tires and better aerodynamics through lowered suspension, redesigned spoilers and additional enhancements underneath each car so the air is better channeled giving less drag which produces better fuel consumption.

With BlueMotion technology, their cars minimize wastage and emissions while making the most of energy sources.

Think Blue extends this philosophy to be more than just about automobiles. It’s a promise to live our lives efficiently and improve the condition of our environment.

Chapter- 4.iii

The Case:-

Volkswagen struggling to make market share in INDIAN MARKET !

Innovative marketing strategies raise awareness

VW India created groundbreaking campaigns such as the world’s first ‘talking newspaper’, which used light-sensitive chips to speak to readers about Volkswagen as they turned the pages of their morning newspaper. The talking newspaper ad created a sensation in India, and garnered worldwide attention for taking print advertising to a new level. In one year, brand awareness more than quadrupled, increasing from 8 percent to a high of 37 percent.

Volkswagen next turned to digital media to extend its success and create new opportunities for customers to connect with the brand.

Lutz Kothe, Head of Marketing for VW India, says, “At Volkswagen, innovation is woven into everything we do. In formulating our digital strategy, we looked beyond the obvious for innovative ways to engage our audience. We knew that for many people, their car affects their professional life and their professional identity affects their car choices. This made LinkedIn a natural choice to connect with current and potential car buyers among the growing Indian professional population.”

*(”Indian car market growth second fastest globally,” The Times of India, Jan 12, 2011; IHS Global Insight Automotive Industry Analysis, (data status: 07/02/11), rounded. )

Engaging working professionals on LinkedIn

LinkedIn approached Volkswagen India with an opportunity to be the first auto major to establish a presence on LinkedIn Company Pages. ‘Company Pages’ provide a branded home base within the LinkedIn community where businesses can showcase their company, products, and services in a trusted, professional environment.

Volkswagen India participated in the worldwide launch of Company Pages in November 2010, and soon thereafter opened up their pages to allow LinkedIn members to post reviews and recommendations of their car line in India including the New Beetle, Vento, and Polo.

Mr. Lutz Kothe, Head of Marketing & PR, Volkswagen Passenger Cars says “We were pleasantly surprised to see how easy it was to create our Company Page on LinkedIn and start engaging with customers among the LinkedIn community. Furthermore, the quality of interaction was very high.

Recommendation Ads get people talking

Next, Volkswagen launched a series of Recommendation Ads encouraging more customers to join the conversation. Each ad showcased endorsements of actual LinkedIn members, and invited the community to recommend their favorite Volkswagen model. Volkswagen used LinkedIn’s broad reach (100 million members worldwide, 9 million in India) and precise targeting capabilities to connect with professionals who matched the buyer proles for their different models.

Lutz Kothe said, “Volkswagen was the first company in India to use LinkedIn Recommendation Ads, and the campaign was a success. We went in with a goal of inspiring 500 recommendations among current and prospective car buyers. In

less than 30 days, over 2,700 Volkswagen fans had stepped forward to recommend their favorite cars and share these recommendations with their professional networks. In the same time period, we gained over 2,300 followers who asked to stay abreast of the latest news and developments from Volkswagen.

Kothe concludes, “In a world where people spend an increasing amount of time at work, thinking about work, and interacting with their work colleagues, we believe it’s important to foster discussion about Volkswagen products in a professional context. Our innovative partnership with LinkedIn lets our customers learn about Volkswagen products and provides insights”.

Keywords: Management Thinking, Organizational Sense making; Organizational Learning; Automotive Industry .

IN MY CONCERN , following are the main points ---

According to Albert Einstein’s famous statement that you cannot solve the problems with the same kind of thinking we used when we created them ,we believe that we need a new way of management thinking as the old way of managing a company by financial results has led us directly into the crises many companies are struggling with today.

Challenge

• Create brand awareness among working professionals

• Build loyalty and aspiration

• Influence decision-making

Solution

• Establish VW-branded Company Page on LinkedIn

• Enable LinkedIn members to recommend their favorite

VW models

• Use LinkedIn Recommendation Ads to extend reach

Why LinkedIn?

• #1 resource for career-minded professionals

• Precise targeting by seniority and geography ensures

match with affordability criteria, dealership locations

Results

• 2,700 product recommendations in 30 days

• 2,300 new followers on VW India Company Page

• 960,000 viral updates about VW car models

The above strategies (Corporate Strategy & Mach 18Plus Strategy) help VOLKSWAGEN to create its brand equity in the Indian Automobile Market !